HZNP - Horizon cut to neural at UBS citing market dynamics for thyroid eye disease drug

UBS has downgraded Horizon Therapeutics ( NASDAQ: HZNP ) to Neutral from Buy, citing a challenging setup for the biotech’s thyroid eye disease therapy Tepezza.

In 2020, the FDA approved the drug for the autoimmune condition characterized by eye bulging, double vision, blurred vision, pain, inflammation, and facial disfigurement.

With its 2Q 2022 results, Horizon ( HZNP ) said Tepezza, its leading contributor to the topline, netted $479.8M sales with ~6% YoY growth compared to ~103% YoY growth in 2021.

“We understand the dynamics impacting the pace of growth of TEPEZZA, and we are executing on our strategy to address them,” Chief Executive Tim Walbert noted.

However, UBS analysts led by Ashwani Verma lower their 2021 – 23 growth outlooks for the drug noting that ‘recent HZNP commentary has implied that bulk of early Tepezza launch success was due to ‘low hanging fruit’ in a new market.”

The firm expects the future Tepezza growth to moderate as further market penetration likely requires an approach to address the non-prescribing physician segment.

With a lack of meaningful pipeline updates in the next six months, the UBS team argues that the only catalyst for the stock could be Tepezza beat/raise.

Noting a difficult-to-achieve outlook provided by Horizon ( HZNP ), the analysts see a balanced risk-reward setup for the stock.

The 12-month price target, slashed to $71 from $137 per share, stands ~38% lower than the current average price target for the stock on Wall Street.

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